The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Government is investing $3.5m in pre-sale upgrades at the Grand Lucayan, the resort’s chairman revealed yesterday, with a preferred buyer unlikely to be selected before Easter 2019.

Michael Scott, chairman of Lucayan Renewal Holdings, the Government-owned special purpose vehicle (SPV) that controls the hotel, told Tribune Business that “limited improvements” were being made to “maximise” the property’s earning potential for the peak winter tourism season that began with this week’s Thanksgiving holiday.

The upgrades are focused on the Grand Lucayan’s sole open property, Lighthouse Pointe, and other “revenue generating” areas, although the still-closed Breaker’s Cay complex will be painted and subject to “cosmetic repairs”.

Mr Scott, meanwhile, confirmed that “two dozen written expressions of interest” have been received from potential Grand Lucayan purchasers as the buyer search moves into high gear.

Colliers, the Canadian-headquartered real estate firm that handled the Baha Mar sales process, is performing the same role for Freeport’s last mega resort property, but the Lucayan Renewal Holdings chairman said a preferred bidder is unlikely to be selected before March/April next year.

He added that he hoped to reach “a final agreement” over the terms and value of staff severance packages next week with the two unions representing the Grand Lucayan staff, with responses to the resort’s latest offer expected today.

“We’re doing some limited improvements focusing on the income-generating parts of the resort, namely the Lighthouse Pointe, the golf course and the convention centre,” Mr Scott told Tribune Business.

“They involve repairs to the air conditioning system at Lighthouse Pointe, repairs to the roof, that sort of thing, In the case of the golf course, it’s bringing the contours of the golf course and the green up to scratch pending the sale, and repairs to the roof at the convention centre. We’re doing some cosmetic repairs, painting, to the facade outside Breaker’s Cay.

“All told, it’s $3.5m, starting now, and taking place through December and into next year. We’re doing it one step at a time. We’re working on sprucing up the quality of the rooms, particularly the higher revenue rooms at Lighthouse Pointe, and making some improvements for the winter season, doing some marketing in conjunction with the Ministry of Tourism,” he added.

“We’re trying to ensure we put what’s there in position to maximise earning potential for the upcoming winter season.”

Mr Scott and the Lucayan Renewal Holdings Board will be seeking to balance essential upgrades, upon which returns can be generated, with the need to limit the Bahamian taxpayer’s financial exposure and ensure no investment is unrecoverable.

Besides the Grand Lucayan’s $65m purchase price, the Government has already committed to a $2m subsidy to cover Hutchison Whampoa’s operating losses between August 1 and the September 11 closing. It also waived the payment of $3.25m in Stamp Duty on the conveyancing by the Hong Kong conglomerate, which then walked away with $80-$85m in Hurricane Matthew insurance proceeds rather than put them into repairs.

On top of this, the Government has now committed to $3.5m in upgrades and several million dollars more in severance packages for Grand Lucayan staff. The growing costs will raise fears among some that the resort could become a financial albatross for the Bahamian taxpayer and Public Treasury if a buyer cannot be found quickly, especially since K P Turnquest, deputy prime minister, previously said the property’s financing costs could ultimately hit $124m.

Mr Scott, meanwhile, pledged that a “methodical” approach will be taken in selecting a buyer for Freeport’s ‘anchor resort’ property via a process that will be “fully open and transparent”.

“We’re in a process,” he told Tribune Business. “We’ve got Colliers, we’re receiving them and processing them [offers], and qualifying them. There’s not going to be a summary decision made on this; it’s going to work its way through the process.

“You’re not going to see much before March/April next year. It’s going to be a methodical, well thought-out process. We’ve got to vet these people, they’ve got to be qualified, experienced in the hotel industry, and have got to have the money. We’ve got Colliers in the mix to objectify the process, and ensure it’s open and transparent.”

The Government initially expressed hope that the Grand Lucayan’s sale to a private sector buyer could be achieved within six months of the September 11 closing, and Mr Scott’s timeline already places it at the edge of this deadline.

Many observers have privately suggested that a sale “will not happen overnight”, especially since the Government is seeking a top-notch purchaser with the vision and wherewithal to not only acquire the hotel but transform the wider Lucayan Strip and rebuild airlift into Freeport and Grand Bahama.

The Prime Minister and his Cabinet ministers recently revealed that around “two dozen” expressions of interest in the Grand Lucayan have been received, a figure that Mr Scott confirmed yesterday was correct. Around half of these were said to have qualified to be given access to a data room containing financial information on the resort.

“Many call but few are chosen,” Mr Scott told Tribune Business. “You whittle those numbers down to six to eight who are serious, and from there whittle it down even more. It’s like a beauty pageant. Some drop out, some realise it’s too much for them to bite off and withdraw themselves, and others we mutually agree that it’s not their project.”

The Lucayan Renewal Holdings chairman also indicated that progress had been made with the trade unions in narrowing the two sides’ differences over the value of separation packages for resort staff wishing to leave.

“We’re still in discussions and I’m hoping to have a final agreement by next week,” he said. “I’ve sent a position to Obie Ferguson and one of his representatives at the Bahamas Hotel Managerial Association, who I met with on Monday, and I’m waiting for them to get back to me; hopefully by tomorrow.”

Talks are also ongoing with the Commonwealth Union of Hotel Services and Allied Workers (CUHSAW) in a bid to resolve a multi-million dollar gap where staff payout demands exceeded the resort’s offer by $4.6m.

Tribune Business previously revealed that the BHMA, which represents the Grand Lucayan’s middle management staff, was demanding a collective $5.4m payout for its members - double the $2.7m offered by the resort’s board.

And the Commonwealth Union of Hotel Services and Allied Workers (CUHSAW), which acts for the line staff, was asking for over $3m - a sum near-triple the Grand Lucayan’s $1.1m proposal. The two trade unions were thus asking for a total $8.4m payout, which represents a sum more than double, or 121 percent higher than the resort’s total $3.8m offer.